In last week’s State of the Union address, President Obama announced proposed tax cuts and other programs aimed at easing the financial burden on the middle class. The proposed changes were the brainchild of the Middle Class Task Force (MCTF), chaired by Vice President Biden.

The MCTF released a fact sheet addressing some of the proposed middle class assistance. Here’s a breakdown of some of the proposed changes that may impact you.

The Saver’s Credit

The ‘Saver’s Credit’, also known as the Retirement Savings Contribution Credit, would be expanded and refundable. This change might have the broadest impact on middle class families overall, since it hits those without dependents.

Expansion: In its present state, the Savers Credit ranges from 10 to 50 percent on the first $2,000 of contributions made to a 401(k), IRA, or other qualified retirement plan. The current income limit for receiving this credit is $55,500 for a married couple and the credit percentage fades out up to that limit.

The new proposal would allow couples making up to $65,000 a year get a full 50% credit on the first $1000 they each contribute for a maximum $500 credit per individual. Couples making up to $85,000 would now become eligible for a partial credit.

Refundable: The credit would be made refundable, meaning that those have no tax liability will get the additional credit added to their tax return versus a non-refundable credit, which only subtracts from your tax liability.

The Child & Dependent Care Tax Credit

The value of the tax credit nearly doubles, from 20 to 35%, for all families making under $85,000 a year. A family that makes between $85,000 and $115,000 would also see a tax credit increase. This means that a qualified family that claims the max amount of $6,000 in expenses will see a tax deduction of $2,100 instead of $1,200.

It may also force a strategic switch to claiming the Dependent Care Tax Credit instead of funding a dependent care flexible spending account, which has a maximum funding amount of $5,000.

Unlike the Savers Credit, the Child & Dependent Care Credit is non-refundable (meaning you won’t get a check from the government if you are already owed a refund).

This credit may be long overdue since it had only been increased once in the prior 28 years and is not indexed to inflation. Meanwhile, child care costs have increased at twice the rate of the median family income over the last decade.

Student Loan Payment Cap, Automatic IRA’s, Support for Elder Care

Obama’s middle class task force also proposed several other initiatives relating to student loans, automatic IRAs, and elder care.

Student Loan Caps:

Two big changes here: A student loan borrower’s payments would be limited to 10% of discretionary income above a standard living allowance. All remaining debt will be forgiven after 10 years of payments if in public service and 20 years otherwise.

Automatic IRA’s:

78 million working Americans are not offered an employer based retirement plan. Under the change, all employers would have to offer a direct deposit IRA to employees, who could opt out, if they chose to. Contributions to the IRA would be voluntary and matched by the Savers Credit for eligible families.

Elder Care Support:

$102.5 million in additional funding will be available for counseling, training, respite care, and more to help families care for seniors in the home.

Your Thoughts?

It remains to be seen whether these proposed changes will pass upcoming budget revisions. If they do and you fall into the ‘middle’ class, how would these proposed changes impact you and your family?

For more of GE Miller’s writing, visit 20somethingfinance.com, a personal finance blog geared towards young professionals.

Photo: Mike Fillion

With only two weeks left in 2009, you might think that it’s time to throw
in the towel on your 2009 taxes. Not so fast! This is the prime time of year
to implement some smart tax deduction strategies. With minimal effort, you
can still have a huge impact on your 2009 tax return by decreasing your
realized income. If any of these strategies appeal to you, speak with a tax
adviser, pronto.

Strategy #1: Fund your Retirement:

You may still be able to add more contributions for your 401k in 2009.

Additionally, you will be able to make tax deductible contributions to a traditional IRA up until the 2009 tax filing deadline (April 15, 2010) for the 2009 tax year. The IRS maximum allowed 401k limit is $16,500 in both 2009 and 2010. For those 50 and over, the catch-up contribution brings you up to $22,000 both years. For IRA’s, the limit is set at $5,000, while the catch-up is $1,000 for both years. Check with your employer ASAP to see if it’s not too late to kick up your contributions.

Strategy #2: Hold Off on the Roth IRA Conversion:

Owners of traditional IRAs can convert all or a part of their accounts to a Roth IRA if their 2009 modified adjusted gross income is under $100,000.

Any amount converted is taxable income, but is thereafter eligible for the
potential tax-free distribution rules of Roth IRA’s. The big news is that
starting in 2010, the $100,000 income threshold is removed – anyone can do a conversion. For 2010 only, you also have the option to spread the income from conversion over the following two years (2011 and 2012). Many have been waiting for this opportunity.

Strategy #3: Sell Losing Investments (and Big Winners):

The S&P 500 index went from the low 900’s to a low of 666 (funny number,
right?) in March, back up to a 2009 high of 1,119. That’s one heck of a
volatile year. All in all, the market is up over 22% for the year. Depending
on when you’ve bought and sold, you might want to consider unloading big
winners to offset your losers, or big losers to offset your winners. First,
you must subtract your losses from any capital gains you’ve made. Next,
additional losses can offset up to $3,000 of your 2009 ordinary income.

Have larger net losses than $3,000? Losses above and beyond what you used to
offset your capital gains and ordinary income can be carried over into
future tax years. Before implementing investment loss strategy by selling
mutual funds, make sure that you won’t incur any penalty for holding shares
for too short of a period of time.

Strategy #4: Capital Gains Tax Cuts:

Under the Tax Increase Prevention and Reconciliation Act (TIPRA) of 2005,
US taxpayers in the two lowest tax brackets (10% and 15%) will pay no
capital gains taxes on long-term investments sold in 2009 and 2010.
Long-term capital gains result from profit made via appreciation of a
security (stock, fund, etc.) held for more than one year.

Strategy #5: When you Donate to a 501(c)(3), Everyone Wins:

Tax deductions for charitable donations can be claimed for the year in which
the donation is made. Perhaps it’s time to rummage through your house to
find valuables you no longer need or want that others can gain value from.
You may obtain fair market value on these items. Or, simply open your
checkbook or donate cash.

Donations of $250 or more must come with a written receipt or letter from
the 501(c)(3). When submitting your donation, ask for and keep all of the
appropriate documentation and receipts associated with all donations so that
you are safe in the event of a possible future tax audit. If you are
donating goods, document a description of everything given.

Strategy #6: Prepay your January, 2010 Mortgage:

If you’re a homeowner, you may want to consider making your January mortgage
payment in December, which will give you one more month of interest to
deduct from your 2009 taxes. Check with your mortgage provider to see if an
early payment is possible. It may be a great way to offset extra income
windfalls in 2009.

Strategy #7: Get Healthy on your Medical Bills:

If you have have large and predictable medical and/or dental bills that need
to be paid, consider making all the payments before the year is over. The
IRS allows families to itemize and deduct medical and dental expenses that
exceed 7.5% of their adjusted gross income, so if you’re close to going over
that percentage it may be wise to pay the bills to be able to make the
tax deduction.

It won’t affect your 2009 taxes (since it was already deducted), but don’t
forget to use up the rest of your 2009 FSA funds if you are in danger of
losing them in the new year.

Strategy #8: Prepare for 2010:

Using Mint.com to classify all of your deductible expenses in 2010, can allow
you to tag anything as tax related. Download your transactions to a
spreadsheet and send it to your accountant. If you’re doing your own taxes,
this info will give you a big head start in using online tax software, such
as TurboTax, which offers federal
filing free. If you expect that you’re due a hefty refund, file asap, so
that you can get back your return and re-invest it. Also, speak with your
employer about your withholding taxes if you have found that you owe too
much taxes or are getting a large refund.

Using TurboTax’s TaxCaster can help you estimate your tax burden and see the impact of any last-minute deductions.

For more of GE Miller’s writing, visit personal finance blog
20somethingfinance.com.

On Friday, the House of Representatives passed the Wall Street Reform and Consumer Protection Act (aka HR Bill 4173). The vote was 223-202. If it were to pass the Senate, the bill would create the regulatory Consumer Financial Protection Agency (CFPA) in addition to other Wall Street and financial institution directed reform measures.

Republican Opposition

Obama applauded the passing of the bill, but blasted Republicans and finance lobbyists in his weekly address and on a 60 Minutes interview airing on Dec. 13 for trying to prevent reform in light of the 2008 economic collapse. Zero Republicans were in favor, (in addition to 27 Democrats who opposed the legislation). Last week, top House Republicans urged more than 100 financial industry lobbyists to work harder to defeat the bill. Lobbyists have spent more than $300 million this year trying to shut the bill down. Republicans argue that the CFPA would limit product innovation and dictate what type of loans consumers should receive in certain situations.

According the White House, as stated on
financialstability.gov, the CFPA would:

1. Provide protection against unfair credit card rate increases and late
fee traps.
2. Set guidelines for simple “Plain Vanilla” mortgage products.
3. Duties of care for mortgage brokers to avoid broker conflict of interest.
4. Ban unfair side payments from lenders to mortgage brokers.

On Executive Compensation

The bill would also oversee executive compensation practices (although not the compensation amounts). In the 60 minutes interview, Kroft asks Obama if he thinks that bailed out banks repayed TARP money just to avoid government oversight on compensation and pay. “I think that in some cases, [to be able to pay bonuses] was the motivation,” Obama responds. “Which I think tells me that the people on Wall Street still don’t get it…They’re still puzzled why it is that people are mad at the banks. Well, let’s see. You guys are drawing down 10, 20 million dollar bonuses after America went through the worst economic year…in decades and you guys caused the problem.”

Watch CBS News Videos Online

In all fairness, they do seem to get it, they just don’t seem to care.

Bittersweet Response from Consumer Groups

Some consumer groups see some benefit in the CFPA, yet argue that the bill does little to address breaking apart ‘too big to fail’ financial institutions such as Goldman Sachs and JP Morgan into pieces (to protect against systemic failure). Others note that the bill does nothing to help those in foreclosure situations or address complex derivatives, the likes of which brought down AIG. Three amendments to address derivative oversight were voted down.

Two members of the Progressive Caucus — Reps. Dennis Kucinich (D-Ohio) and Marcy Kaptur (D-Ohio) — also voted against the final legislation because they were concerned that it didn’t go far enough to help consumers.

Final Thoughts

It is very clear that financial institutions and their lobbyists have had a heavy hand in reshaping the WSRCPA to be a shadow of its former self. Sadly, it’s unclear whether the consumers and taxpayers (whom the bill was originally created for) will be better off should the bill pass the Senate in early 2010.

Perhaps the reform that we need most would come in the form of the regulation of lobbyist activity and campaign contributions. The Center for Responsive Politics found that members of the House who voted against the measure collected 70 percent more from commercial banks since 1989, on average, than those supported it. And they raised an average of 50 percent more from credit and finance companies than the bill’s supporters, the CRP found.

I vote for reforming the reformers.

For more of GE Miller’s writing, visit personal finance blog
20somethingfinance.com.

photo: fristle

This is part 2 in a 2 part series on how to lower your auto insurance premiums. The first part covered 10 variables that you can control when it comes to lowering your premiums, while this post will talk about 10 factors that are out of your control – and what to do about them.

Same Message, Different Company. Different Message, Same Company?

We’ve all seen the ads about how switching your auto insurance from ‘the other’ company to ‘our company’ has saved the customer an average of $XYZ. It’s most likely left you wondering how every single insurance company can save you more than every other one. What that same advertisement doesn’t tell you, of course, is how much the guy/gal who didn’t switch saved by staying with their current auto insurance provider or going to a different one.

And while we’re on the topic of auto insurance commercials, I’d like to take this opportunity to call out the marketing department of Geico. Seriously, guys? The gecko was a pretty cool guy and the caveman thing was slightly funny at first, but it’s simply gone too far. And now the googly eyes on a pile of dollar bills that somehow plays that 80’s song by that guy who is trying to sound like Michael Jackson. And running all three ad campaigns on the same medium at the same time? Collect yourselves, people!

Let’s continue with the ads. Wouldn’t you love to hear “Customers who switched to us saved $215 (while those who didn’t switched saved $357)”? When shopping for auto insurance, unfortunately, there really is no easy answer to the question of which company offers the lowest rates. The reason being is that most insurance companies, by design, use a different proprietary formula to determine what price they can specifically offer you. Some of the variables that go into this formula can be controlled by you, but most cannot.

So what should you do? How do you find the lowest rate? Before we go into premium savings strategy, it definitely pays to know what variables insurance companies are looking at when calculating your risk. Let’s take a look.

The Auto Insurance Premium Factors that are Out of your Control

Fair or not, auto insurance companies (and insurance companies in general) are master statisticians and they have determined the risk to have you as a customer for just about everything down to what color shoes you wear. These are traits or characteristics that you mostly don’t have control over, but are often used to calculate your auto insurance premium. Sure, you can change some of these things, but you would rarely change them just to get a break on your auto insurance.

1. Your age: Most policies give a reduction at 21 years of age, or with 5 years experience. A further reduction can be expected at around 24 or 25. Once you hit the ripe age of 70, you can expect the opposite to occur.

2. Your gender: Women are statistically safer drivers. This one surprises me as I’ve been a passenger while my wife is driving. She was in three accidents prior to meeting me and with my set of eyes to prevent her from driving through red lights when her attention wanders, she hasn’t been in any after meeting me. Sorry, honey, it’s true.

3. Where you live: Locales with high rates of accidents or theft can result in a higher premium.

4. Your past driving record: Some insurers look back three years, others look back five years or longer. Depending on the company that is quoting you and how recently you had a major traffic violation or accident, this can have a huge impact on your premium. Don’t worry about that pile of parking tickets in your glove box as they do not impact your driving record and premiums.

5. Your marital status: Married drivers can pay less than single drivers.

6. Occupation: Doctors tend to get in less accidents on average than ice cream truck drivers. Go figure.

7. College degrees: Most insurers give discounts to alums of certain universities.

8. Years of driving experience: similar impact as age.

9. Business use of vehicle: If using your vehicle as part of your job, you are at risk of a higher premium (and probably rightly so).

10. Multiple Vehicles: Are you insuring multiple cars on the same plan? If so, it could result in lower premiums for each vehicle.

Now that you know what you can and cannot control, what can you do about it?

The answer is simple. Shop around. Frequently.

It’s true that you may not have control over a lot of what your premium is based on, but your saving grace is that the auto insurance companies don’t all agree on how to precisely calculate your risk. Until they do, it pays to shop around.

When Should you Shop Around for Auto Insurance?

For starters, it might make sense to shop around after the following events take place:

• When you turn 21.
• When you turn 25.
• 3 years after you have a traffic violation or accident.
• 5 years after you have a traffic violation or accident.
• When you move.
• When your miles driven decreases significantly.
• When you graduate.
• When you get a new job.
• When you get married.
• When you get a life insurance policy.
• When you get a home insurance policy.
• When you add another car to you plan.
• When you install a theft deterrent device.
• When you get a new car.
• When your credit score has improved.
• Whenever you feel like it!

Final Thoughts:

There is no auto insurer who offers the lowest rates to everyone. But there is an auto insurer who offers the lowest rate to you specifically. You just need to find them. And it might be a different insurer six months or a year from now than it is today. That’s why it pays to know what the insurance companies look at, what discounts you might be able to swing, and to shop around frequently.

For more of G.E. Miller’s writings, visit personal finance blog MicroFrugality.com.

New! Compare Auto Insurance with Mint.com.

PhotoDu.de

When it comes to auto insurance premiums, there are a number of factors that you have absolutely zero control over. Most of us like to think that we’re the best drivers to ever hit the road, but we’ve all felt the pain of being 18 years old and having to pay considerably more for the same vehicle than the crazy guy who lives down the street. The injustice!

The good news is that there are a number of factors that you have considerable control over when it comes to your auto insurance premium. In the first of a two part series, we’ll cover the 10 prime factors that you have control over that most auto insurance companies consider in the formulas used to determine how much to charge you.

1. Switch Vehicles

Each vehicle is assessed a different risk variable depending on a number of factors, including category classification, crash test rating, price, cost of replacement parts, and even horsepower-to-weight ratio and how often the model is stolen. If you want a lower premium you should avoid sports cars, expensive vehicles, newer vehicles, and those that are not considered to be top of class in safety (smaller vehicles). Each year, the National Highway Traffic Safety Administration (NHTSA) reports an insurance make and model comparison. Each insurance company should share similar information, should you ask for it.

2. Pay Up Front

Some insurers offer a discount if you pay for the year ahead up front all at once versus a monthly payment plan. If you have the cash on hand to pay up-front, don’t worry about losing it if you switch insurers. Your insurance company is required to pro-rate your total bill and refund you for the days that you won’t be covered under them.

3. Drive Like an Angel

Believe it or not, your driving record is still considered to be one of the top factors that insurance companies look at. Whether you’ve been in an accident or received a major traffic violation within the last few years can have a huge impact on your premium. Some auto insurance companies look back three years, while others look back 5 or more.

4. Cut your Miles

A number of auto insurance companies will offer you a lower premium if you drive less miles. Makes sense for them and for you, right? Moving closer to work might not only save you on fuel and commute time, but it may also decrease your auto insurance premium as well. If you make a move closer to work or end up drastically cutting your mileage driven, call your insurance company to see if it can earn you a discount. A number of insurance companies are offering pay-by-the-mile programs, which may end up costing you less than traditional plans if you rarely drive at all.

5. Improve Your Credit Score

Credit history is becoming a much more highly valued variable that is being looked at by insurance companies (however, this is not allowed in the State of California). We’d recommend that you move to California if your credit history is terrible, however, the cost of living would more than cannibalize any savings in auto insurance.

6. Reduce your Insurance Levels

Whether or not you have collision and comprehensive coverage certainly dictates how much your premium will be, but your decision to carry it really should come down to how much your vehicle is presently worth. Each state has a liability coverage minimum that you should be aware of when determining how much you want to carry. We do not suggest lowering your coverage to the minimum to save money, as that may end up being a big mistake should you get into an accident. However, it might be to your benefit to keep an eye on your liability coverage if it is high and you are in need of cutting your premium.

7. Buy a Vehicle with a Theft Device or have one Installed

Purchasing a vehicle with a theft deterrent system or having one installed will most often get you a discount.

8. Same Insurer, Multiple Policies

Having multiple insurance policies with the same company typically gets you a hefty discount. As if comparing apples to apples wasn’t already hard enough, most auto insurance companies will give you varying levels of discounts for also having a home, life, or other insurance policy with them. You may find that even though one car insurance company would charge you more than another, your ‘total’ insurance cost to go with them is less.

9. Be a Loyal Customer

Loyalty can be rewarded when it comes to sticking with your auto insurance company. As witnessed by the massive amounts of advertising insurance companies partake in, the cost and value to acquiring a new customer is very high. That’s why a good number of insurance companies will give you a percentage off on your total premium each year just for sticking around. It’s also for this reason, especially if you’ve been a cheap customer for them in the past, that they may be a little more willing to work with you in lowering your cost than a Comcast might be. Stick around long enough, and it may be difficult to find a cheaper policy elsewhere.

10. Increase your Deductible

How high of a deductible you set has a significant impact on your premiums. For example, increasing my deductible from $250 to $500 reduced my overall premium by 25%. If you have an older vehicle with a relatively low value it makes a lot of sense to have a high deductible. It makes even more sense if you don’t have collision or comprehensive coverage to begin with – because there is not much else that would make the cost/benefit of having a low premium worth it.

What About All the Factors you can’t Control?

We’ll discuss those and what to do about them in the second part of our series on how to lower your auto insurance premiums.

For more of G.E. Miller’s writings, visit the personal finance blog MicroFrugality.com.

New! Compare Auto Insurance with Mint.com.

The Average American’s Saving Rate

According to the Bureau of Economic Analysis, the average American was only saving 1% of their disposable personal income as recently as the first quarter of last year. That number has jumped to 5% in the 2nd quarter of 2009, the highest percentage in the last decade.

At the same time, according to the US Census Bureau, the average retirement age in America is 62 and average life expectancy is 77, meaning that 20% of the average American’s lifespan would need to be financially covered between personal savings and Social Security. Yikes!

Long-Term Sustainability for the Country

For long-term sustainable economic growth, that’s simply not good enough. The White House realizes that if Americans are saving only between 1 and 5% of their income per year for retirement, then just about everyone is going to need to live almost entirely off of social security. Not only is that unsustainable, it is downright frightening to think of what that might mean for the nation’s financial health.

In his weekly address, President Obama explains, “We cannot continue on this course. And we certainly cannot go back to an economy based on inflated profits and maxed-out credit cards; the cycles of speculative booms and painful busts; a system that put the interests of the short-term ahead of the needs of long-term. We have to revive this economy and rebuild it stronger than before. And making sure that folks have the opportunity and incentive to save – for a home or college, for retirement or a rainy day – is essential to that effort.”

Federal Changes to Retirement Plans

According to White House analysts, half of America’s workforce doesn’t have access to a retirement plan at work. Additionally, fewer than 10 percent of those without workplace retirement plans have one of their own. The federal changes will take effect to address these issues. Some of the biggest changes that could impact you are:

1. Auto enrollment in retirement plans: It will now be easier for smaller and medium-sized employers to automatically enroll workers into retirement plans due to an elimination of paper-work hurdles for employers to offer that option. Employees could still choose to opt out of the retirement plans if they choose to.

2. Saving tax refunds: To make it easier for those owed tax refunds to save, the IRS will allow tax filers in 2010 to recoup their refund by issuing US savings bonds. Last year, over 100 million US households received check refunds. And we all know what happens to most of those.

3. Sick and vacation days can become 401k contributions: It will now be easier for employers to convert (or allow workers to convert) unused vacation and sick leave pay into 401k contributions. Historically, this money is almost always converted into cash.

4. Automatic Percentage Increases: Many 401k administrators already have this, but now employers can boost contribution amounts automatically unless employees opt to have them not to.

Even if you’re not impacted by the government’s plan, there are still a lot of things you can do yourself to make sure you are in good shape for retirement. Start by asking yourself two questions:

What percent of your income are you presently savings towards retirement?

What percent do you need to save in order to retire when you want to?

Then follow this four step action plan to ensure you’re doing everything you can.

1. Boost your Savings. If you’re presently saving 10% of your income, boost it to 12%. If 20%, boost it to 25%.

2. Start a Roth or Traditional IRA. You can contribute up to $5,000 in 2009 ($6,000 if you’re 50 and above).

3. Take advantage of 100% of your company’s 401k match. You can’t beat free money.

4. Run the numbers. The Social Security Administration, Bloomberg, and AARP all have free retirement calculators to help you determine how much you need to be saving.

For more of GE Miller’s writing, visit personal finance blog 20somethingfinance.com.

Photo:uniinnsbruck

Whether you are heading to school for the first time or going back for another year, you’ll quickly have to face a sad paradox. College is expensive and students are perpetually broke. Forget tuition and room and board, the cost of textbooks, software, transportation, and just about everything else is enough to put any aspiring student into debt. It’s almost like there is a target on your back (or your wallet). Rather than sit back and let the debt pile up, try these four simple cost savings strategies to save thousands annually.

Photo:psychobabble

1. Stop Buying, and Start Renting your Textbooks.

Remember those $150 textbooks that you skim through once out of guilt or fear? Every time I went through the checkout line I held deep-seeded resentment about paying outrageous sums for textbooks that I would barely use and then end up selling back to the bookstore at the end of the semester at a fraction of the price I paid for them. You would think that having three different bookstores on campus would result in competitive pricing, only to find that they were all charging the same obscene price right down to the penny.

Studies show that the average student spends over $900 per year on textbooks. But you may not have to anymore. There are now a number of textbook rental sites that claim to offer up to 70% or more off of retail price to rent textbooks for a semester. For starters, you may want to check out Bookrenter, Chegg, and Campus Book Rentals. Additionally, you may be able to find used versions of your books on Amazon, Abebooks, or Ebay. A little competition in the marketplace is a beautiful thing.

Average Savings: At 50% off – $450 per year

2. Ditch the Office!

At some point, we’ve all had to write a paper, present to a class, or use a spreadsheet for a math project. Yes, we’ve all needed to use an office software suite and if you go the Microsoft route when purchasing software, you’ll end up paying approximately $120 for Office 2007.

That’s one option. Fortunately, there are a few other options these days:
Open Office: Powered by Sun Microsystems, Open Office is an open source office software suite that is nearly identical to Microsoft Office. The best part is that the full suite is available for a free download at Openoffice.org. You are even able to share your files in Microsoft office program formats if you need to share them with others.

GoogleDocs: GoogleDocs is a suite of “cloud-based” word processor, spreadsheet, and presentation applications. Although the features aren’t quite up to par with MS Office or Open Office, the programs let you collaborate with others and can import and export into other formats. This makes it a great option when working on projects with other students in real (or delayed) time.

Best of all, they’re free.

Together, these two free options should be more than sufficient in meeting all of your document needs.

Average Savings: $120 per Office version

Photo:Ihoon

3. Rolling Down the Street – In a Bus.

Before the macho types lynch me for suggesting that they give up an opportunity to impress their sorority dream woman, here is a difficult to hear truism: the right date will not only care less that you take the bus versus riding around campus in an SUV, but they may actually respect and like you more for it.

Even if you’re able to find a modest used vehicle at $200/month, you will probably need to add at least another $100 or more per month for insurance and fuel. Additionally, you will be able to avoid all of those extremely frustrating parking tickets (how do they always find you??). In contrast, a search for my alma mater’s bus system yielded a semester-long bus pass for a mere $50.

Average Savings: $2,600 (for a $200/month vehicle with $100/month in insurance and fuel expenses)

Photo:Editor B

4. Open a Local Bank or Credit Union Checking Account.

Even as we trend more towards a plastic society, ATM fees for college students can add up quickly. If you’re attending a school out-of-state or even just out-of-region, your bank or credit union may not have authorized ATM’s. Starting up a free checking account for these petty cash transactions can be a huge money saver.

In 2008, the average cost of using another bank’s ATM was $3.43 per transaction, up 13% from 2007. Back in the day, it wasn’t uncommon for students to make at least one or two ATM withdrawals per week. Avoid this unnecessary expense!

Average Savings: $110 annually (1 withdrawal per week)

What tips do you have for savings money while attending school?

For more of GE Miller’s writing, visit personal finance blog 20somethingfinance.com.

Source:kokopinto

Health insurance premiums in the US have increased in cost by almost 100% since the year 2000, a growth rate three times larger than wage increases over the same period of time. At the same time, one out of every three Americans is uninsured, or underinsured. Moreover, health insurance premiums are more than double for Americans than they are for citizens of the second highest cost nation, Norway.

These daunting facts leave little doubt that health care costs in America have spun out of control and the financial health of each American, and the country as a whole, is dependent upon smart health care reform. What’s not as clear is the right way to go about it. Details on the health care legislation currently making the rounds are sparse and very fluid at this point, but we’ll try to dissect some of the basics and how the plan may impact you if it were to pass in its present form.

What are the basics of the Obama Administration’s health care reform legislation?
So far, this is what can be decoded from the constantly changing legislation.

1. All Americans would be required to be covered by health care insurance – either through out-of-pocket or government subsidy.
2. A new health care insurance exchange market would be created. You can think of this as a gigantic group plan, monitored by the government.
3. You can keep your employer’s plan, if you’d like (and they decide not to drop their plan for the cheaper exchange).
4. Insurance companies would be required to provide a basic level of insurance for everyone who signs up for the exchange. Premiums cannot be increased for those with pre-existing conditions.

When would the reform go into effect?

The Obama Administration had been leading a big push to get a health care reform bill passed quickly by the Senate. However, the details and resulting consequences of legislation of this impact have stamped out that possibility. On Thursday, Senate Majority Leader Harry Reid (D-Nev.) announced that the Senate will not vote on health care reform legislation by the August recess, saying that it is “better to have a product based on quality and thoughtfulness rather than try to jam something through,” as reported by the AP/Boston Globe.

Despite the delay, if the legislation were to pass later this year under the same timeline as proposed, it would go into effect in 2013.

Who stands to benefit the most from Obama’s health care reform?

It’s unclear how the bill will benefit the majority of Americans who already have employer sponsored health care plans at this point. In theory, premiums should be decreased because the insured are no longer footing the bill for the uninsured. The reform aims to immediately help:

1. Those without any insurance.
2. Those who have paid for expensive individual policies on their own.
3. Employees of small businesses that have trouble affording the cost of joining a group plan.
4. Low income Medicare participants who are left paying for whatever is not covered by Medicare for their medical bills and prescriptions.

Whether intended or not, the legislation could also mean more profits for insurance companies by making it a requirement for all Americans to purchase an insurance policy, be it by subsidy or out-of-pocket.

How much is this going to cost?

The legislation is expected to cost $1 trillion over 10 years. Obama insists that it would be revenue neutral, meaning that it would not be an expense added to the budget deficit.

Who is going to pay for it?

The entire tax burden is expected to be placed on the shoulder’s of the very wealthy. Originally, it was to come from a surtax on American households earning over $250,000 annually. However it was recently bumped to those earning over $350,000, and even more recently, those earning over $1 million.

What will happen to my doctor?

Nothing. You can still go to them, and they’ll still be living large in the wealthiest zip codes in your locale.

Who is opposing the present version of the legislation?

1. Republicans: This goes without saying, right? Any new taxes on the wealthy or are sure to meet Republican opposition. This legislation is no different.
2. Democrats: Wow, really? Yes. Some of the more liberal Democrats, led by Dennis Kucinich, have been pushing for the addition of a single payer option. The United States is currently the only high-income industrialized country in the world that does not have some version of a single payer, public health insurance. Single payer refers only to health insurance and payments for health service being funded by a single public fund. Kucinich and others want this option to be included in the legislation.
3. The Obscenely Wealthy: More taxes means less luxury goods and $900 bottles of wine vs. $1,000. Can you blame them?

Where can I find out more?

The White House has created a public site dedicated to providing information and news on health care reform – at healthcarereform.gov.

For more of GE Miller’s writing, visit personal finance blog 20somethingfinance.com.

amycgx

Fresh off of the heels of Congress’s passing of the Credit Cardholders Bill of Rights, President Obama sent a proposed law to Congress, which if enacted, would create a shiny brand new Consumer Financial Protection Agency (CFPA). The agency would not only help enforce the Credit Cardholders Bill, it would expand into the broader scope of consumer protection. Treasury Secretary Geithner summarized the agency by saying, “This agency will have only one mission – to protect consumers”.

Knowing exactly what the proposed CFPA would mean for you is based largely on speculation at this point, and the full effects may not be seen for years (and the bill isn’t expected to go to vote until this fall or beyond). However, it’s fair to say that the primary reason behind the proposed creation of the new agency would be to police and put an end to the type of greedy and unfair predatory practices by financial institutions (mostly banks and credit providers) that has resulted in many borrowers suffering from undue financial hardship.

Citing the agency’s crackdown on predatory mortgage lending techniques, President Obama states, “You’ll be able to compare products and see what’s best for you. The most unfair practices will be banned. Those ridiculous contracts with pages of fine print that no one can figure out – those things will be a thing of the past.” Although, I find it hard to imagine that my next mortgage closure will result in anything less than a headache and a mild case of carpal tunnel, having an agency focused on enforcing simple, concise, and clear terms is certainly a step in the right direction.

According the White House’s official press release on financialstability.gov, the CFPA would

1. Provide protection against unfair credit card rate increases and late fee traps: The agency will enforce the credit card bill enacted by Congress and President Obama this spring, taking responsibility for enforcing the ban on unfair rate increases and for the implementation of new rules preventing late fee traps.

In other words, the Credit Cardholders Bill of Rights that was passed recently, but doesn’t go into effect until mid 2010 needs a governing body. The CFPA would be that governing body.

2. Set guidelines for simple “Plain Vanilla” products: The agency could create guidelines for standard mortgages without prepayment penalties; that are fully underwritten with documented income; that collect escrow for taxes and insurance; and have predictable payments.

Remember all of those funky ARM’s, jumbo loans, and other sleek mortgage names masking a product that is designed to rip you off? The CFPA would seek to put an end to these type of products.

3. Duties of care for mortgage brokers: The agency could require mortgage brokers to owe a duty of best execution among available mortgage loans to avoid conflicts of interest between themselves and the homeowners, and a duty to help ensure that only appropriate loans are offered.

A colleague who once worked for one of the nation’s largest mortgage lenders once told me that ‘in the good ole days’ mortgage underwriters would look for any possible reason to offer the largest loan possible and ignore little technicalities such as the borrower not providing proof of income. The goal of the CFPA would be to put an end to this type of practice and ensure that financial institutions are offering the right loan amounts to the right people in the right situations.

4. Ban unfair side payments: The agency could ban unfair practices such as “yield spread premiums” – side payments from lenders that encourage mortgage brokers to push consumers into higher priced loans.

Essentially, what the press release is trying to say here is that the CFPA would monitor and attempt to put an end to broker/institution side arrangements that are designed to steer you into a mortgage that may not be the best for you, but results in the mortgage broker getting a commission.

If you’d like to curl up and read the full version of the CFPA-Act bill, you can check it out here.

The Opposition

The financial industry will surely be up in arms over the bill, because it provides the type of oversight that they have been able to evade for so long. Opponents argue that the CFPA would limit product innovation and dictate what type of loans consumers should receive in certain situations.

Didn’t product innovation and offering ‘customized’ loans mostly get us into this mess?

For more of GE Miller’s writing, visit personal finance blog 20somethingfinance.com.

Paul Keleher

As the credit crisis winds toward its inevitable conclusion, the number of customers unable to pay off their credit card each month is swelling. And credit card companies, facing the very real possibility of customers defaulting entirely, are now willing to come to a settlement for substantially less than the amount owed. With the credit card companies ready to deal, here’s what you need to know to get your own personal bailout.

Credit Cards are Unsecured Loans

Credit cards are a form of unsecured loans. What does this mean in layman’s terms? An unsecured loan is a loan in which a borrower is not required to use an asset as collateral in order to receive credit. In contrast, secured loans (mortgages or auto loans, for instance) use collateral that may be repossessed should the borrower default on their payments. By the nature of their business models, credit cards and other forms of unsecured loans typically offer shorter payback terms and higher interest rates.

Bailouts for the Delinquents?

With the recent rise in unemployment and wage cuts, credit card debt delinquency has significantly increased and shows little sign of slowing down. So what’s a credit card company to do? Bail you out! If you fall into the delinquency camp, there is a good chance that you may be able to negotiate an agreement with your card provider to pay off a portion of your debt in exchange for them wiping out the rest.

Increasingly, consumers are reporting that they are getting offers from their card providers to wipe out debt in exchange for payments. Few creditors are admitting to the practice. American Express and Bank of America admit to deciding on a case-by-case basis whether to accept partial payments. Other companies are keeping their lips shut, but their trade group, the American Bankers Association, acknowledges that settlements are becoming more common.

What not to do

Let’s be 100% clear. If you are NOT delinquent on your debt, it would be extremely bad practice to purposefully go into debt in the hopes to get a free ride and have your debt wiped out. There are no guarantees that any company will wipe out your debt, and the risks and costs associated with trying to pull this trick off are simply not worth it.

If you are delinquent, it would be equally as risky to go on a spending spree in the hopes that your debt will be forgotten. Be smart and ethical. Debt settlements can still show as a black mark on your credit history, and this is bad news for you. Debt settlement should be resorted to only at last option.

How to Settle your Credit Card Debt

You’ve done everything you can to get out of debt, but just can’t seem to dig out of the hole. Your only option is to settle. There is no exact science to settling debt with every credit card company, and a lot of your success will come down to your negotiation skills. This is tricky business and if you’re in doubt, you may want to consult with a lawyer or certified financial professional. Here are some suggestions if you’ve decided to go down this path based on stories that we’ve heard from others who have succeeded.

1. Stop making payments: if you’re paying off at least a portion of your debts, why would the credit card company have any reason to settle with you? Wait at least 60 to 90 days prior to making an offer.
2. Build enough cash to offer a settlement: at the same time you’ve stopped making payments, you’re going to have to have money on hand to make an offer. Perhaps you sell some of the luxuries that got you into this mess in the first place or get a second job.
3. Make your first offer: explain your situation and make an offer. 25% is a good starting point. The credit card company is probably not going to accept your first offer, so it’s good to start low. You may get a counter offer at this point – but be patient in your negotiations.
4. If you increase your offer, ask for more: ask for any black marks on your credit report to be removed in your negotiations.
5. Get it in writing: get your agreed upon terms in writing from the credit card company.
6. Make your payment: pay by money order and send via certified mail so that you can verify that you fulfilled your end of the agreement.
7. Tax significance: you will get a 1099 from your credit card company and must claim the forgiven amount as income on your tax return.
8. Learn from your mistakes: if you can’t get your credit history wiped clean, the ‘debt settled’ mark will stay on for seven years past settlement. This will result in you having difficulty getting good credit terms during this time. Learn from your mistakes so that this does not happen again.

For more of GE Miller’s writing, visit personal finance blog 20somethingfinance.com.

Here’s Mint’s credit card guide and credit card calculators to help you manage your credit.